nep-res New Economics Papers
on Resource Economics
Issue of 2013‒04‒13
eight papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Incidence and Environmental Effects of Distortionary Subsidies By Heutel, Garth; Kelly, David L.
  2. Brown Backstops Versus the Green Paradox By Thomas Michielsen
  3. Cap-and-Trade Climate Policy, Free Allowances, and Price-Regulated Firms By Bruno Lanz; Sebastian Rausch
  4. Value for Money in Environmental Policy and Environmental Economics By Pannell, David J.
  5. The Transition from the Neoclassical Growth Model to Ecology By Schlauch, Michael; Palmisano, Gaia
  6. Environment, Health, and Human Capital By Joshua Graff Zivin; Matthew Neidell
  7. The implications of natural resource exports for non-resource trade By Harding, Torfinn; Venables, Anthony J
  8. Social Costs of Jobs Lost Due to Environmental Regulations By Timothy J. Bartik

  1. By: Heutel, Garth (University of North Carolina at Greensboro, Department of Economics); Kelly, David L. (University of Miami)
    Abstract: Government policies that are not intended to address environmental concerns can nonetheless distort prices and affect firms' emissions. We present an analytical general equilibrium model to study the effect of distortionary subsidies on factor prices and on environmental outcomes. We model an output subsidy, a capital subsidy, relief from environmental regulation, and a direct cash subsidy. In exchange for receiving subsidies, firms must agree to a minimum level of labor employment. Each type of subsidy and the employment constraint create both output effects and substitution effects on input prices and emissions. We calibrate the model to the Chinese economy, where government involvement affects emissions from both state-owned enterprises and private firms. Variation in production substitution elasticities does not substantially affect input prices, but it does substantially affect emissions.
    Keywords: Pollution; China; Incidence; Perverse Subsidies
    JEL: H23 Q52 Q58
    Date: 2013–04–02
  2. By: Thomas Michielsen
    Abstract: Anticipated climate policies are ineffective when fossil fuel owners respond by shifting supply intertemporally (the green paradox). This mechanism relies crucially on the exhaustibility of fossil fuels. We analyze the effect of anticipated climate policies on emissions in a simple model with two fossil fuels: one scarce and dirty (eg oil), the other abundant and dirtier (eg coal). We derive conditions for a 'green orthodox': anticipated climate policies may reduce current emissions. Calibrations suggest that intertemporal carbon leakage (from -22% to 13%) is a relatively minor concern.
    Keywords: Mineral Resources, Transport Infrastructure, Regional Trade Integration, Gravity Model, Economic Legacy of Colonialism
    Date: 2013
  3. By: Bruno Lanz (ETH Zurich, Switzerland); Sebastian Rausch (ETH Zurich, Switzerland)
    Abstract: Firms subject to cost-of-service regulation cannot withhold windfall profits associated with free emissions allowances. This paper examines the efficiency and distributional impacts of two approaches to transfer free allowances to consumers: output subsidies and lump-sum payments. We employ an empirically calibrated model of the U.S. economy that features regulated monopolies in the electricity sector and many heterogeneous households. Under a carbon dioxide cap-and-trade policy, we find that using free allowances to subsidize regulated electricity prices increases aggregate welfare costs by 40-80 percent relative to lump-sum transfers. These inefficiencies are disproportionately borne by households in the tails of the income distribution.
    Keywords: Climate policy; Cap-and-trade; Allowance allocation; Cost-of-service regulation; Electricity Generation.
    JEL: C61 C68 D58 Q43 Q54
    Date: 2013–04
  4. By: Pannell, David J.
    Abstract: Requirements that environmental programs must meet in order to deliver value for money are identified, illustrated and discussed. It is argued that environmental managers and policy makers should carefully consider the extent to which potential policies and investments deliver environmental outcomes, not just outputs and activities. Processes for ranking potential environmental investments need to consider a sufficient set of information to properly evaluate benefits and costs. That information must be in a rigorous way. Many ranking systems in practical use do not meet these requirements. Environmental projects of different scales and intensities can vary greatly in the value for money that they offer, so different versions of a project should be evaluated and compared. The effectiveness of a program or project can be sensitive to the policy mechanism(s) used, so these too should be compared and evaluated for each potential project. Programs should be designed in a way that provides incentives for environmental managers to develop and pursue projects that provide high value for money, rather than creating barriers to that outcome. In some cases environmental economists could increase the value for money from investments in their research and analysis by avoiding the over-concentration of effort into a subset of the many types of information needed to make sound management and policy decisions. There are several reasons to expect that relatively less detailed or sophisticated information may provide greater value for money: diminishing marginal benefits from sophistication and detail, increasing marginal costs of sophistication and detail, and the limited capacities of potential users of this information. There is significant potential to improve the value for money generated by public investments in environmental projects and in environmental economics, although there are significant challenges in each case.
    Keywords: Environmental Economics and Policy,
    Date: 2013–03–14
  5. By: Schlauch, Michael; Palmisano, Gaia
    Abstract: This paper examines the assumptions and conclusions of the neoclassical growth model put forth by Solow and many others. We investigate the origins of the paradigm of unlimited growth and technological progress and question their plausibility. In contrast, we develop a modified version of the neoclassi- cal growth model where we consider non-human, environmental resources such as energy as an additional input factor and recognize their limited ca- pacity to recover from human impact. Surprisingly, the same mathematical framework of the neoclassical growth model gets to the opposite conclusions - namely that long term growth cannot exceed a level in which nature begins to deplete. Growth further that level as we might experience today leads to natural and economic disaster. Technological progress understood as produc- tivity increase can only delay but not prevent this crisis. We compare these conclusions to the opposite hypothesis of the Environmental Kuznets Curve. Also we show how this model can lead to a greater understanding of present or future observations that are connected to environmental deficiency, such as social divergence and stagnating life satisfaction in developed countries.
    Keywords: growth; degrowth; limits of growth; ecological economics; resource efficiency; solow-swan model; sustainability; ecology; neoclassical growth model; EKC; environmental kuznets curve
    JEL: O11 O30 Q01 Q26 Q43
    Date: 2013–04–05
  6. By: Joshua Graff Zivin; Matthew Neidell
    Abstract: In this review, we discuss three major contributions economists have made to our understanding of the relationship between the environment and individual well-being. First, in explicitly recognizing how optimizing behavior, particularly in the form of residential sorting, can lead to non-random assignment of pollution, economists have employed a wide range of quasi-experimental techniques to develop causal estimates of the effect of pollution. Second, economic research has placed a considerable focus on the role of avoidance behavior, which is an important component for understanding the difference between biological and behavioral effects of pollution and for proper welfare calculations. Lastly, economic research has expanded the focus of analysis beyond traditional health outcomes to include measures of human capital, including labor supply, productivity, and cognition. Our review of the quasi-experimental evidence on this topic suggests that pollution does indeed have a wide range of effects on individual well-being, even at levels well below current regulatory standards. Given the importance of health and human capital as an engine for economic growth, these findings underscore the role of environmental conditions as an important factor of production.
    JEL: H23 H41 I12 J24 Q5
    Date: 2013–04
  7. By: Harding, Torfinn; Venables, Anthony J
    Abstract: Foreign exchange windfalls such as those from natural resource revenues change non-resource exports, imports, and the capital account. We study the balance between these responses and, using data on 41 resource exporters for 1970-2006, show that the response to a dollar of resource revenue is, approximately, to decrease non-resource exports by 75 cents and increase imports by 25 cents, implying a negligible effect on foreign saving. The negative per dollar impact on exports is larger for countries which have good institutions and higher income levels. These countries have a higher share of manufacturing in their non-resource exports, and we show that manufactures are more susceptible than other products to being crowded out by resource exports.
    Keywords: Dutch disease; exports; imports; natural resources; resource curse; trade
    JEL: E21 E62 F43 H63 O11 Q33
    Date: 2013–01
  8. By: Timothy J. Bartik (W.E. Upjohn Institute for Employment Research)
    Abstract: This paper estimates the social costs of job loss due to environmental regulation. Per job lost, potential social costs of job loss are high, plausibly over $100,000 in present value costs (2012 dollars) per permanently lost job. However, these social costs will typically be far less than the earnings associated with lost jobs, because labor markets and workers adjust, increased leisure has some value, and employers benefit from wage reductions. A plausible range for social costs is 8 - 32 percent of the associated earnings of the lost jobs. Social costs will be higher for older workers, high-wage jobs, and in high unemployment conditions. Under plausible estimates of job loss for most environmental regulations, the social costs of job loss will typically be less than 10 percent of other measured social costs of regulations. Therefore, adding in job loss is unlikely to tip many regulatory benefit-cost analyses.
    Keywords: Benefit cost analysis, worker displacement, environmental regulation, social cost of labor
    JEL: D61 Q52 J68
    Date: 2013–03

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